Misty Company had 22,000 units of ending inventory that were recorded at their cost of $9.00 per unit using the first-in,first-out (FIFO)method.The current replacement cost is $4.75 per unit.Which of the following amounts would be reported as Ending inventory on the balance sheet using the lower-of-cost-and-net-realisable-value rule?

Question

Quizplus · Accepted Answer

According to the lower-of-cost-and-net-realizable-value rule, the ending inventory should be valued at the lower of its cost or net realizable value.

In this case, the net realizable value is the current replacement cost, which is $4.75 per unit.

Therefore, the ending inventory should be valued at either its historical cost of $9.00 per unit or the net realizable value of $4.75 per unit, whichever is lower.

Since the net realizable value of $4.75 per unit is lower than the historical cost of $9.00 per unit, the ending inventory should be valued at $104,500 (22,000 units x $4.75 per unit).

Therefore, the correct answer is C). $104,500.

Misty Company Had 22,000 Units of Ending Inventory That Were